Days of Our Lives Demurrer Order

1 Hon.
Gary A Feess (Retired)

Phillips ADR Enterprises
2 2101 East Coast Highway, Suite 250
Corona del Mar, CA 92625
3 (949) 760-5288
gfeess@phillipsadr.com
4
Judicial Referee
5
6
7
8 SUPERIOR COURT OF THE STATE OF CALIFORNIA
9 FOR THE COUNTY OF LOS ANGELES
10 CENTRAL DISTRICT
11 CORDAY PRODUCTIONS, INC.,
a New York Corporation, Case No. 19STCV04632
12
Plaintiff, ORDER RE: DEFENDANTS’
13 DEMURRER
v.
14
SONY PICTURES TELEVISION
15 INC., a Delaware Corporation, CPT
HOLDINGS, INC., a Delaware
16 Corporation, COLUMBIA PICTURES
INDUSTRIES, INC., a Delaware
17 Corporation, SCREEN GEMS, INC., a
Delaware Corporation and DOES 1-10,
18 inclusive,
19 Defendants.
20
21
22
23
24
25
26
27
28
ORDER RE DEFENDANTS’ DEMURRER

Case No. 19STCV04632
1 I. BACKGROUND
2 In 1964, Corday Productions, Inc. (Corday) created and produced the daytime
3 soap opera, Days of our Lives, and entered into an agreement with Screen Gems, the
4 predecessor of CPT Holdings, Inc. (CPT), with respect to that series.1 The agreement
5 was superseded by a lengthy written agreement executed in May 1972 (referenced
6 throughout as “the Agreement”). (Yankelovitz Decl., Ex. A.) 2 The Agreement,
7 which is described as “in the form of a Production-Distribution Agreement”
8 established the terms and conditions under which Corday would produce and CPT
9 would distribute the series episodes. The series has aired on NBC on a nearly daily
10 basis for the past 55 years. Over that period, the Agreement has been amended three
11 times, most recently in 2013. (Id., Exs. B-D.)
12 The Agreement is at the center of a dispute between the parties that has
13 generated this lawsuit, in which Corday alleges that, since 2016, the revenues
14 generated by the series have precipitously declined due to CPT’s misconduct. (See
15 Compl., Paras. 1-2.) In substance, Corday contends that CPT has ceased making “any
16 meaningful effort” at distributing the series (Oppos. To Demurrer, at 3), has
17 deliberately miscalculated series profits (id.), has “deliberately deflated” the NBC
18 licensing fee (id.), and done so in the interest of promoting other shows it is
19 distributing, including its “wholly-owned daytime drama, The Young and the
20 Restless.” (Id., at 4.) In Corday’s view, CPT’s conduct represents a “total abdication
21 of its duties to provide sales representation and distribution for the Series.” (Id., at 3.)
22 Most specifically, Corday contends that CPT has abandoned all effort to market the
23 series in foreign markets, which has dramatically reduced Corday’s revenue stream.
24 (Compl., Paras, 9-10.) Corday further alleges that CPT has likewise made no effort to
25
1
The pending complaint is unclear as to the roles of the named defendants in this
26 dispute. When referring to defendants, this order will, in most instances, reference
CPT Holdings, Inc. because its name appears on the most recent amendments to
27 2 the 1972 contract. (Yankelovitz, Exs. C & D.)
CPT requests judicial notice of the Agreement and three subsequent amendments
28 thereto. Because these documents are generally referenced in the complaint and
are not reasonably in dispute, the request for judicial notice is GRANTED.
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1 market the series in supplemental markets such as streaming video on demand (id.,
2 Para. 24) or to exploit the 50 years of Days of our Lives episodes in its back catalog.
3 (Id., Para. 25.)
4 In the pending Complaint, Corday alleges that CPT’s conduct gives rise to
5 causes of action sounding in both tort and contract. CPT has responded to the
6 Complaint by demurring to each of the seven stated causes of action. CPT contends
7 that, accepting the allegations as true, none of the claims states a cause of action on
8 which relief can be granted. The issues raised by CPT’s demurrer are addressed
9 below.
10 II. DISCUSSION
11 A. Legal Standard
12 A demurrer tests the legal sufficiency of a pleading by asserting that the facts
13 set forth in the complaint fail to state a cause of action on which relief can be granted.
14 Award Metals, Inc. v. Superior Court, 228 Cal.App.3d 1128, 1131 (1991). The
15 demurrer treats “all material facts properly pleaded” as true, but does not assume the
16 truth of “contentions, deductions or conclusions of law.” Miles v. Deutsche Bank
17 National Trust Co., 236 Cal.App.4th 394, 400 (2015).
18 A complaint survives a demurrer if it states facts disclosing
some right to relief. [Citation.] A demurrer may be
19 sustained without leave to amend where the nature of the
plaintiff's claim is clear and under the applicable
20 substantive law it is plain that there can be no liability.
[Citation.]
21
22 Award Metals, 228 Cal.App.3d, at 1131-32.
23 The standard is therefore clear: if the facts are adequate to support the cause of
24 action alleged, the demurrer must be overruled; if not, it should be sustained, and if
25 the facts make clear that amendment will not cure the defect, leave to amend should
26 be denied.
27
28
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1 B. Breach of Fiduciary Duty
2 Corday asserts that the conduct alleged in the first cause of action, if proved at
3 trial, constitutes a breach of fiduciary duty. CPT contends that, as a matter of law, the
4 cause of action should be dismissed because the Agreement between the parties did
5 not create a fiduciary relationship.
6 The Agreement on its face is labeled as a “Production Distribution Agreement”
7 which CPT contends is dispositive because “a fiduciary relationship does not exist
8 between a producer and a distributor.” (Demurrer, at 4.) In support of that
9 proposition, CPT relies heavily on Wolf v. Superior Court, 107 Cal.App.4th 25
10 (2003), Recorded Picture Co. v. Nelson Entertainment, Inc., 53 Cal.App.4th 350, 370-
11 71 (1997), and Waverly Productions, Inc. v. RKO General, Inc., 217 Cal.App.2d 721,
12 732-34 (1963). Corday contends that the label is not controlling, that the cited cases
13 are distinguishable, and that the terms of the present agreement, notably profit sharing,
14 establish a joint venture, or at least a sales agency, either of which would make CPT a
15 fiduciary of Corday. (See Oppos., at 4; Compl. at Paras. 7, 44; Yankelovitz, Ex. A.)
16 Corday focuses much of its argument on April Enterprises, Inc. v. KTTV, 147
17 Cal.App.3d 805, 818-19 (1983).
18 There can be no argument that there are fiduciary duties associated with joint
19 ventures and agency relationships. Likewise, there is no doubt that substance prevails
20 over form and that a label on an agreement is not necessarily controlling. However, a
21 careful look at the overall agreement and the relationship between the parties shows
22 that it contains the indicia of a commercial, rather than a fiduciary, relationship. The
23 relationship created under the terms of the Agreement lacks critical elements of a joint
24 venture and the complaint does not, and could not, allege the existence of an agency
25 relationship.
26 1. Producer-Distributor Relationships are not Joint Ventures
27 Corday observes that the Agreement provides that Corday and CPT “share
28 equally in the profits” generated from the exploitation of the series. (Oppos., at 4.) In
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1 Corday’s view, this component of the Agreement is critical because profit sharing is
2 the “hallmark of a joint venture.” (Id. citing April Enterprises, Inc. v. KTTV, 147
3 Cal.App.3d 805, 818-19 (1983). This assertion is misleading because, while profit
4 sharing is a common element of a joint venture, cases like Wolf expressly hold that an
5 agreement that involves profit sharing without more does not give rise to a fiduciary
6 relationship. 107 Cal.App.4th, at 31. And though Wolf did not involve a production-
7 distribution agreement, it drew on precedent involving such agreements to reach its
8 conclusion by noting, “even distribution agreements, negotiated at arm's length, do not
9 create a fiduciary relationship between the product's owner and the distributor even
10 though both parties stand to benefit from the distributor's sales of the product.” 107
11 Cal.App.4th, at 32; see also Recorded Picture, 53 Cal.App.4th at 370-71 (“[I]f a
12 fiduciary relationship does not exist between a producer and a distributor, then no
13 such relationship exists between a producer and a subdistributor.”) Controlling case
14 law therefore teaches that producer-distributor relationships are ordinarily not
15 fiduciary in nature.
16 But even if there were no controlling precedent in these circumstances, an
17 evaluation and application of the elements of a joint venture to the facts of this case
18 leads to the same result. April Enterprises, 147 Cal.App.3d 805 (1983) on which
19 Corday places substantial reliance, indicates that mere profit sharing is not sufficient
20 to prove a joint venture. Rather, three elements must be shown; (1) an ownership
21 interest in the enterprise; (2) joint control over the enterprise; and (3) a sharing in the
22 profits of the enterprise. Orosco v. Sun Diamond Corp., 51 Cal.App.4th 1659, 1666
23 (1997); see also April Enterprises, 147 Cal.App.3d, at 819 (articulating the elements
24 as “(1) joint interest in a common business; (2) with an understanding to share profits
25 and losses; and (3) a right to joint control.”) Two of these three elements are not
26 present in this case.
27
28
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1 a. Ownership
2 There is no dispute that Corday is the sole owner of Days of our Lives.
3 Corday alleges that it “is the owner and producer of Days of our Lives, (Compl.
4 Para. 3), and that it “is the owner of the Series and all rights therein.” (Compl.,
5 Para. 39.) Thus, Corday concedes in its complaint that CPT has no ownership in
6 the property that is the product of the alleged joint venture. But Corday contends
7 in substance that ownership in the Series is beside the point under either the
8 Orosco or April Enterprises formulation of the elements of a joint venture. But
9 Corday fails to take the next step and allege facts that show that the parties had
10 ownership interests in a joint enterprise or a joint interest in a common business
11 that owned and controlled the property of the venture.3 Corday’s complaint and
12 argument assert in substance that, because the parties shared an interest in the
13 profits derived from CPT’s marketing and distribution efforts, that was enough to
14 establish a “joint interest in a common business.” However, Wolf unambiguously
15 rejected such a conclusion,107 Cal.App.4th, at 32, which would turn any business
16 collaboration with a profit-sharing component into a joint venture. The fact that
17 both parties expect to benefit from the distribution agreement does not establish
18 a common business in which the parties have a joint interest. Id.
19 At the hearing on the demurrer, Corday argued that Myrick v. Mastagni, 185
20 Cal.App.4th 1082, 1091-92 (2010) supports his argument. A close reading
21 suggests otherwise. Myrick involved a negligence action brought against building
22 owners by the heirs of persons killed when the building collapsed during an
23 earthquake. An issue on appeal involved the propriety of making the defendants
24 jointly and severally liable for the damages based on the jury’s finding of a joint
25

26
3
Corday has not provided a plausible basis for distinguishing between the April
Enterprises and Orosco formulations (joint interest in a common business
27 versus ownership interest in the enterprise) and none is apparent. But it is
not necessary to resolve any differences between the two cases because,
28 under either formulation, Corday has not and cannot allege a joint venture
relationship.
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1 venture. Defendants argued that there was insufficient evidence to show that
2 each member of the joint venture had an ownership interest in the enterprise
3 that owned and operated the building. The appellate court, in reviewing the trial
4 record, rejected that argument. It found that all of the defendants had some
5 ownership interest in the operation of the building as a business, id., at 1091, and
6 that even if the jury was not properly instructed on the ownership element, the
7 error was harmless. Id., at 1092. Thus, by indicating that the evidence showed
8 that each of the defendants had some ownership in the building as a business, the
9 appellate court did not conclude, as Corday argues, that ownership is not an
10 element of a joint venture. In fact, the analysis implies that joint ownership of a
11 common enterprise, or of the property to be exploited in the enterprise, is a
12 necessary element of a joint venture. April Enterprises is consistent with this
13 conclusion because it noted that “the requisite interest in a common business is
14 supplied by the allegations that the parties planned to co‐produce the shows in
15 order to exploit the market for its syndication . . . .” Id., at 819. (Emphasis
16 added.) Moreover, each of the parties had some degree of control over the
17 exploitation in their production in syndication. Here CPT neither co-produced
18 Days of our Lives nor owned any interest in the Series or the rights therein.
19 (Compl., Para. 39.) The ownership/common enterprise element is therefore
20 missing. See also City of Hope National Health Center v. Genentech, Inc., 43 Cal.4th
21 375, 391 (2008) (complex agreement creating interrelated obligation of two
22 parties to develop and commercially exploit City of Hope’s intellectual property
23 regarding the synthesis of DNA to produce therapeutic proteins held not to
24 establish joint venture).
25 Here, as in Recorded Picture, Waverly, Wolf and City of Hope, the parties
26 have agreed to a collaboration in which CPT would provide financing and
27 distribution services with respect to a product, the television series, developed
28 and produced by Corday. But the parties have not undertaken to conduct a single
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1 business enterprise in which they each share an interest, or shared ownership
2 and control over the property to be exploited. Rather, each party operated its
3 respective enterprise which contributed its specialized expertise to a commercial
4 endeavor that both hoped would be (and for many years was) profitable. Such
5 agreements are common in the television industry and do not create a joint
6 venture.4
7 b. Control
8 The Complaint also fails to plead adequate facts to establish the control
9 element. Production was entirely in the hands of Corday; distribution was CPT’s
10 responsibility. Corday acknowledges as much by alleging that “it is the creative
11 engine behind Days of our Lives and is responsible for developing, producing, and
12 managing the Series.” (Compl., Para. 4.) This allegation is corroborated by the
13 Agreement which in its first paragraph identifies Corday as the series producer.
14 (Yankelovitz, Ex. A.) The Agreement contemplated that NBC would finance the
15 series through the licensing fee paid to Corday (Compl., Paras. 7, 42), but that CPT
16 would act as interim financier to the extent necessary before revenue was received
17 from NBC. (Ex. A, Para. 1.) The allocation of duties and responsibilities
18 demonstrates that the Agreement’s self-description as a “production distribution
19 agreement” was accurate. April Enterprises is readily distinguishable because it
20 involved an express agreement under which the parties would co-produce a television
21 program and share equally in the right to exploitation in syndication, which was the
22 basis for the court’s determination that the element of joint control had been
23 adequately pled. 107 Cal.App.3d at 819.
24
25

26 4 Corday references Paragraph 13 which is a provision regarding a transfer of
“ownership” (quotes in the original text of Exhibit A) to third parties. But the
27 paragraph refers to transfers of its sales rights (not ownership in any entity or
in the Series) and obligates CPT to give the same rights to Corday. It does not
28 refer to an interest of the type that would customarily establish the existence
of a joint venture.
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1 Nevertheless, contrary to its own allegations, Corday contends that CPT had
2 control over the production by virtue of its financing role, its ability to approve the
3 executive producer and writers, and its control over sales of the show. But the parties
4 concede that the Series was financed through the NBC license and that CPT’s role was
5 to bridge the period between production and payment of the licensing fee. The
6 arrangement is similar to that described in City of Hope where Genentech financed
7 City of Hope’s synthesis of the DNA sequences that would then be used by Genentech
8 to manufacture certain protein sequences. 43 Cal.4th 381-82. Despite that financial
9 arrangement, the court found no joint venture between the parties. Moreover, the
10 Complaint makes it clear that NBC, and not CPT, ultimately had the power of the
11 purse in this relationship. (See Compl., Paras. 19-20 describing NBC intervention
12 when CPT allegedly refused to fund the Series). Accordingly, the interim financing
13 obligation does not give CPT control over the production of the Series.
14 As to the Executive Producer position, CPT in 1998 ceded authority to Corday
15 by pre-approving the retention of any family member in the position of Executive
16 Producer. (See Ex. B.) Likewise, the Complaint alleges no facts indicating that CPT
17 ever exercised any control over the selection of an Executive Producer or any writers,
18 and Paragraph 9(c) of the Agreement also gives certain approval rights to NBC, which
19 was a buyer, not a producer, of the Series. Finally, as to its control over sales of the
20 show, that is an activity separate and apart from production of the series. There is no
21 case cited holding that a distributor’s right to sell and distribute a television series
22 amounts to control over production of the series for what appear to be obvious
23 reasons.
24 In short, the Complaint makes it clear that, in every significant respect, Corday
25 handled all aspects of the production of Days of our Lives, and that CPT’s role was
26 that of marketer and distributor of the product of Corday’s efforts.
27
28
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1 c. Profits
2 There is no question that the Agreement provided for some form of profit
3 sharing, but that arrangement was significantly modified a decade ago in an
4 amendment to the Agreement that eliminated aspects of the alleged profit-sharing
5 arrangement. In 2009, the parties agreed that Corday would receive all performance
6 bonuses payable by NBC, and that CPT would have no obligation to share in any
7 production costs in excess of an average weekly license fee of $775,000. To the
8 extent that CPT financed the cost overruns, the amendment provided that it would
9 recoup those outlays from distribution proceeds. Thus, by allocating a greater share of
10 the revenues to Corday, which then agreed to take on the burden of budget overruns,
11 the parties even more clearly delineated their respective and separate responsibilities.
12 If it weren’t clear before the amendment, the modification of the contract terms
13 highlighted the purely commercial, arm’s length nature of the parties’ relationship.5
14 On this point, Wolf and City of Hope are particularly noteworthy because those courts
15 held that a fiduciary relationship is not necessarily created even when one party
16 entrusts its intellectual property to its counter-party for development. Here Corday
17 maintained control over the ownership, development and production of its intellectual
18 property. In these circumstances, there is simply no basis for concluding that the
19 parties entered into a joint venture giving rise to a fiduciary relationship.
20 2. CPT Was Not Corday’s Agent
21 In its opposition, Corday argues that, even if the parties were not in a joint
22 venture, CPT was Corday’s Sales agent under the terms of the Agreement. (Oppos., at
23 7.) This argument suffers from two defects. First, despite Corday’s argument that is
24

25
5
Corday cites to the series credits indicating that Corday has produced the series “in
association with” Screen Gems. But that ambiguous language, without more, does
26 not overcome the fact that Corday had undisputed ownership of the series and
exercised control over its production. Likewise, Corday’s reference to language in
27 the Agreement regarding approval of writers’ contracts is not accompanied by any
allegation that CPT ever exercised any of those purported rights. Without evidence
28 of an actual assertion of control, a joint venture does not exist. Orosco, 51
Cal.App.4th 1667.
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1 “adequately pled an agency relationship,” it offers only a citation to Ex. A, Paragraph
2 1, in support. The Complaint contains no allegation that CPT was Corday’s agent.
3 Second, the elements of an agency relationship are not present under the terms of the
4 parties Agreement.
5 As CPT notes in its reply, an agent is one who operates under the direction and
6 control of the principal. “The right of the alleged principal to control the behavior of
7 the alleged agent is an essential element which must be factually present in order to
8 establish the existence of agency, and has long been recognized as such in the
9 decisional law. [Citations.]“ Desuza v. Andersack, 63 Cal.App.3d 694, 599 (1976);
10 see also Batzel v. Smith, 333 F.3d 1018, 1035 (9th Cir. 2003) (agency relationship
11 created by agreement of parties and requires that agent not only act on behalf of
12 principal, but also “subject to the principal’s control”); Alvarez v. Felker, 320
13 Cal.App.2d 987, 1001 (1964) (distribution agreement giving control over sales to
14 distributor does not create an agency relationship).. Here the distribution agreement
15 gave CPT the responsibility for marketing Days of our Lives but gave it sole control
16 over that activity. Nowhere in the Agreement is Corday given the right to exercise
17 control over CPT’s conduct. While Corday may have the right, under contract, to
18 challenge the adequacy of performance, it has no right to proceed against the
19 distributor on an agency theory.
20 The demurrer to the Breach of Fiduciary Duty Claim is therefore SUSTAINED
21 WITHOUT LEAVE TO AMEND.
22 C. Fraud and Concealment
23 The fraud and concealment causes of action do not merit extended discussion.
24 Fraud claims must plead facts to establish each of the essential elements of the claim,
25 e.g., Hoffman v. 162 North Wolfe LLC, 229 Cal.App.4th 1178, 1185-86 (2014), and
26 must plead those facts with particularity. Tarmann v. State Farm Mut. Auto. Ins. Co.,
27 2 Cal.App.4th 153, 157 (1991) (“Every element of the cause of action for fraud must
28 be alleged in the proper manner and the facts constituting the fraud must be alleged
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1 with sufficient specificity to allow defendant to understand fully the nature of the
2 charge made.’“) In the case of a corporate defendant, this obligation includes the
3 requirement that the plaintiff “allege the names of the persons who made the allegedly
4 fraudulent representations, their authority to speak, to whom they spoke, what they
5 said or wrote, and when it was said or written.” Id.
6 Here the claims fail on almost every element, but most notably in the failure to
7 allege reliance. Corday alleges that it was presented with accounting figures that
8 show budget overruns and with statements regarding efforts to market the series in
9 England and France. But Corday does not claim to have been deceived by these
10 statements or to have engaged in detrimental conduct based on them. On the contrary,
11 Corday alleges that it never believed them in the first place and contests their
12 accuracy. In other words, it never relied to its detriment on those statements because
13 it did not believe them to be true. And without reliance, there can be no causation and
14 damages.
15 With respect to concealment, Corday does not describe who specifically at CPT
16 concealed information from it, what specific information was concealed, how it relied
17 on the alleged concealment or how the concealment caused it damage. As to the
18 contention that there was an obligation to disclose due to the fiduciary relationship
19 between the parties, that issue has been resolved by the ruling on the breach of
20 fiduciary duty claim.
21 At the hearing, Corday’s counsel indicated that it could plead fraud with greater
22 particularity. While that seems unlikely, given the nature of the relationship between
23 the parties, the timing of the alleged misrepresentations, and the unlikelihood that
24 Corday can ever plead reliance, Corday will be given another chance to plead this
25 claim. The demurrer is therefore SUSTAINED WITH LEAVE TO AMEND.
26
27
28
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1 D. The Breach of Contract Cause of Action
2 1. The Parties’ Positions
3 Corday’s Fourth Cause of Action alleges that CPT is in breach of the contract
4 between the litigants consisting of two 1972 agreements together with subsequent
5 amendments. The alleged breach consists of: (1) ceasing to make any effort to market
6 and distribute the Series; (2) refusing to negotiation new more favorable terms (as
7 mandated by Paragraph 10 of the Agreement) now that the series consists of one hour
8 rather than 30 minute episodes; (3) forcing Corday to bear the costs of production
9 overages even where the overage is the result of conduct mandated by CPT; (4)
10 refusing to share marketing expenses for the Series, which Corday has been forced to
11 bear due to the breach; and (5) failing to account for and pay production and
12 distribution profits. (Compl., Paras. 129-32;178-80.)
13 Defendants demur to the breach of contract cause of action on the ground that
14 Corday has not identified a specific contract provision that has been breached.
15 Defendants contend that: (1) there is no implied term regarding the degree of effort to
16 be employed in the marketing and distribution of the Series, and therefore Corday has
17 no right to “object” to CPT’s level of effort; (2) Paragraph 10 applies to new series,
18 not Days of our Lives, which, in any event, has consisted of one hour episodes for four
19 decades; (3) production overages are the obligation of Corday under the terms of the
20 agreement without exception, which Corday accepted in the 2009 Amendment in
21 exchange for receiving 100% of all performance bonuses; and (4) there is no
22 contractual term that obligates CPT to bear marketing expenses and that Corday has
23 chosen to pay all marketing expenses in recent years. The demurrer does not speak to
24 the allegation that CPT has not properly accounted for and paid production and
25 distribution profits.
26
27
28
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1 2. Discussion
2 The foregoing indicates that the breach of contract claim involves several
3 specific grounds on which breach is alleged, some of which are viable and some
4 of which are not.
5 a. Paragraph 10
6 First, with respect to Paragraph 10 of the Agreement, there is no basis for
7 arguing that CPT is in breach for not negotiating new terms based on the shift to
8 60-minute episodes. The paragraph expressly refers to possible series other
9 than Days of our Lives. The term has nothing to do with the number of episodes
10 produced in a week, but rather the number that are telecast in a week. Finally,
11 the Series was expanded to 60 minutes per episode four decades ago, so any
12 claim that a breach occurred when that change was made has long since been
13 waived. The alleged breach of Paragraph 10 is therefore not a viable breach of
14 contract theory
15 b. The 2009 Amendment re Production Overages
16 Second, with respect to the issue of production overages, the parties
17 expressly agreed in the 2009 amendment that Corday would receive all
18 performance bonuses and that it would, in turn, agree to pay for all production
19 overages. The contract contains no “reasonableness” limitation, or any other
20 limitation, on Corday’s obligation to pay production overages. Accordingly, there
21 is no basis for alleging breach of the term of the 2009 amendment based on
22 anything CPT has allegedly done to cause Corday to incur production costs.
23 c. The Obligation to Market and Distribute
24 Third, the parties vigorously dispute whether the distribution obligation
25 contains a “commercial reasonableness” or a “best efforts” component. Corday
26 insists that it does, at least in what it describes as “reasonably available markets.”
27 (Oppos., at 11.) CPT contends that such a term would be implied only if Corday
28 otherwise received no consideration under the terms of the Agreement. (Reply,
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1 at 7-8.) In support of this argument, CPT relies heavily on Third Story Music, Inc.
2 v. Waits, 41 Cal.App.4th 798 (1995) and Avidity Partners, LLC v. State of California,
3 221 Cal.App.4th 1180 (2013).
4 Third Story involved a contract between a company that owned the rights
5 to Tom Waits “musical output” between 1972 and 1983 and the company that
6 purchased those rights under an agreement that gave the buyer the express right
7 to market or refrain from marketing the purchased materials. The seller sued
8 under the covenant of good faith and fair dealing when the buyer determined not
9 to market the Waits materials. The appellate court noted that the contract
10 conferred complete discretion on the buyer, and stated the issue as “when should
11 the implied covenant of good faith and fair dealing be applied to limit its
12 discretion?” Id., at 802. Citing to Supreme Court precedent, e.g., Carma
13 Developers, Inc. v. Marathon Development California, Inc., 2 Cal.4th 342 (1992), the
14 appellate court observed that the case contained an inconsistency by requiring
15 that discretion be exercised in good faith while at the same time indicating that
16 the covenant of good faith and fair dealing cannot be applied to vary the express
17 terms of an agreement. 41 Cal.App.4th, at 803. In reconciling the tension, the
18 court observed that where there is complete discretion on the part of one party,
19 the implied covenant of good faith and fair dealing need not be implied to modify
20 the exercise of discretion if the contract is otherwise supported by adequate
21 consideration. In Third Story, the court therefore concluded that, because the
22 buyer of the rights paid an annual advance on royalties, there was no need to
23 imply an obligation of good faith to create mutuality. The court concluded:
24 The conclusion to be drawn is that courts are not at
liberty to imply a covenant directly at odds with a
25 contract’s express grant of discretionary power except
in those relatively rare instances when reading the
26 provision literally would, contrary to the parties’ clear
intention, result in an unenforceable, illusory
27 agreement.
28
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1 Id., at 808. Accordingly, the appellate court affirmed the trial court’s decision
2 sustaining the buyer-defendant’s demurrer.
3 Avidity Partners reached a similar conclusion. In that case, which involved
4 a complex agreement between a timber company, the State of California and the
5 federal government, the timber company agreed to sell 7,000 acres of old growth
6 redwood forest in exchange for other forest lands and $495 million. Avidity
7 claimed that the agreement included a promise that the timber company would
8 be permitted to harvest the trees on the acquired forest lands at a specified
9 average rate per year. When the state eventually refused to grant permits to
10 allow the timber company to harvest its trees, it sued. The lawsuit raised several
11 complex issues regarding the state’s ability to contractually limit the exercise of
12 its police powers, but the appellate court determined that those issues need not
13 be reached because there was no promise to permit harvesting at a specified rate
14 per year. Moreover, there could be no breach of the covenant of good faith and
15 fair dealing regarding the state’s alleged implied obligation to approve harvesting
16 because the contract was otherwise supported by adequate consideration in the
17 form of a substantial monetary payment. Id., at 1207.
18 These cases are not controlling because this is not a case where the
19 promisor has been given absolute discretion to distribute, or not distribute, the
20 Series. CPT cites no term giving it discretion to market or refrain from doing so.
21 Its contention that Corday’s construction of the Agreement “ is absurd” and that
22 the Agreement is not reasonably susceptible to the interpretation alleged in the
23 Complaint is not persuasive, at least as a pleading matter. From the perspective
24 of a neutral, the Agreement appears to contemplate that CPT would be obliged to
25 make some effort to market and distribute the Series (and was incentivized to do
26 so), and the conduct of the parties over five decades supports that interpretation.
27 Thus, this is not a case where a party seeks, through application of the covenant
28 of good faith and fair dealing to place a limit on the exercise of an express
- 15 -
1 discretionary term to which the parties have agreed. Rather, it is a case where a
2 party who has been the beneficiary of the performance of an obligation implicit
3 in a non-discretionary contract term alleges that performance of that obligation
4 has ceased. The key term being “alleges” because this ruling does not purport to
5 definitively interpret the agreement at this stage of the proceedings, but only to
6 say that the pleading has alleged a reasonable interpretation of the Agreement.
7 Corday will still be obliged to prove that its interpretation is correct, and that, so
8 construed, CPT in fact breached the Agreement.
9
d. Shared Marketing Costs
10
CPT contends that Corday concedes that it was obligated to bear the costs of
11
marketing the Series, which is inconsistent with its general allegation that the parties
12
agreed to an equal split of those costs. This is not a fair reading of the Complaint.
13
(See Compl., Paras. 117 et seq.) The Complaint contends that the Agreement, as
14
reflected in the parties’ course of conduct over more than five decades, included an
15
understanding that the parties would share marketing costs on a 50-50 basis. It
16
concedes that the costs of producing the show were re-allocated to Corday in the 2009
17
amendment but alleges that the parties never altered their cost sharing arrangement
18
with respect to the marketing of the Series. (Id., Para. 118.) As to Corday’s
19
payments, it acknowledges payment of 100% of “recent marketing and promotional
20
expenses”, but that it was required to do so because “Sony . . . has abdicated that
21
responsibility to Corday” and has refused to reimburse for those expenses. (Para.
22
128.)
23
Whether Corday can prove these allegations cannot be resolved at this stage of
24
the proceedings. If the allegations are as wide of the mark as Defendants contend, it
25
should be simple enough to defeat. But at this point the allegations are adequate to
26
defeat Defendants’ demurrer.
27
28
- 16 -
1 e. Conclusion
2 For the foregoing reasons, the breach of contract claim may proceed on the
3 grounds that CPT breached its obligation to market and distribute the Series and
4 to share marketing costs. As to those aspects of the Complaint, the demurrer is
5 OVERRULED. As to the alleged breach of Paragraph 10 and the 2009
6 amendment, the demurrer is SUSTAINED WITHOUT LEAVE TO AMEND.
7 E. Breach of the Covenant of Good Faith and Fair Dealing
8 Corday contends that CPT’s conduct breached the covenant of good faith
9 and fair dealing implied in every contract. Defendants argue that the claim is
10 redundant because it amounts to nothing more than a claim that CPT breached
11 the same contract terms identified in the breach of contract claim and is
12 therefore superfluous. In support, CPT cites Avidity and Third Story Music. To be
13 sure, the Avidity court held that a claim based on the same allegations as a breach
14 of contract claim is “superfluous since it relies on the same alleged acts and seeks
15 the same relief . . . .” 221 Cal.App.4th, at 1203. See also Bionghi v. Metropolitan
16 Water Dist., 70 Cal.App.4th 1358, 1370 ( 1999). Likewise, Third Floor Music and
17 Avidity, discussed above, make it clear that the covenant of good faith and fair
18 dealing cannot add a contractual term or contradict an express contractual
19 provision unless necessary to provide consideration by curbing the exercise of
20 discretion under certain limited circumstances.
21 However, the implied covenant does not exist merely to curb a promisor’s
22 exercise of discretion. As the Supreme Court observed in Guz v. Bechtel, 24
23 Cal.4th 317, 349 (2000):
24 The covenant of good faith and fair dealing, implied
by law in every contract, exists merely to prevent one
25 contracting party from unfairly frustrating the other
party's right to receive the benefits of the agreement
26 actually made.
27 Thus, while it adds no substantive term to a contract, Love v. Fire Ins. Exchange,
28 221 Cal.App.3d 1136, 1153 (1990) and does not create duties beyond the scope
- 17 -
1 of terms of the agreement, Guz, at 349, it does protect the reasonable
2 expectations of the contracting parties and provides a remedy where a promisor
3 undertakes action to frustrate the objectives of the parties’ agreement. See also
4 Pashman v. Aetna Ins. Co., 2014 WL 3571689, at *13 (N.D.Cal., July 16, 2014)
5 (citing Guz for the proposition that implied covenant exists to prevent a party
6 from acting “in bad faith to frustrate the contract’s benefits”). Likewise, the
7 court in Careau & Co. v. Security Pacific Business Credit, Inc., 222 Cal.App.3d 1371,
8 1395 (1990) observed that the covenant of good faith and fair dealing involves a
9 duty beyond those found in the express terms of the agreement.
10 [A]llegations which assert such a claim must show
that the conduct of the defendant, whether or not it
11 also constitutes a breach of a consensual contract
term, demonstrates a failure or refusal to discharge
12 contractual responsibilities, prompted not by an
honest mistake, bad judgment or negligence but
13 rather by a conscious and deliberate act, which
unfairly frustrates the agreed common purposes and
14 disappoints the reasonable expectations of the other
party thereby depriving that party of the benefits of
15 the agreement.
16 Id., at 1395. Conduct that meets this standard is to be determined on a “case by
17 case basis.” Id.
18 Corday contends that Defendants have unfairly and in bad faith interfered
19 with Corday’s right to receive the benefits to which it is entitled under the terms
20 of the Agreement, including those rights described in the breach of contract
21 claim. Corday alleges a number of ways in which CPT has allegedly frustrated
22 Corday’s reasonable expectations of performance. For example, Corday alleges
23 that CPT refused to fund production of the 2019-20 season and relented only
24 when NBC intervened. (Compl., Para. 20; see also Oppos., at 12-13.) These
25 allegations are not merely a regurgitation of the breach of contract claim and
26 therefore are not superfluous. Whether the allegations will be supported by
27 evidence, and even if they are, whether Corday can succeed in showing that the
28 conduct in fact was taken in bad faith to frustrate Corday’s rights under the
- 18 -
1 Agreement remains to be seen. But for present purposes, the Complaint contains
2 sufficient facts to allow the breach of covenant claim to go forward.
3 E. The Accounting and Declaratory Relief Claims
4 The accounting claim would ordinarily be appropriate in connection with a
5 breach of fiduciary duty claim or in circumstances where an action for damages
6 is inadequate to determine an amount due and owing. Jolley v. Chase Home
7 Finance, LLC, 213 Cal.App.4th 872, 910 (2013); Teselle v. McLaughlin, 173
8 Cal.App.4th 156, 179-80 (2009). Here the parties are engaged in a long-standing,
9 complex relationship under which CPT periodically provides financial statements
10 to Corday regarding the profit status of the Series under the terms of the parties’
11 agreements. Those statements are in dispute, and an accounting may be
12 required to sort out and resolve that dispute. It is not possible to say at this stage
13 that this is a case where an accounting cannot or should not be ordered.
14 Likewise, Defendants argument on the declaratory relief claim is simply to
15 assert that there has been no breach and therefore there is no ground for this
16 claim. But, as discussed above, it is not possible to say at this stage of the
17 proceedings that the contract has not been breached. Accordingly, the
18 declaratory relief remedy may be pursued.
19 Accordingly, the demurrer to the accounting and declaratory relief claims
20 is OVERRULED.
21 F. The UCL Claim
22 The UCL prohibits three kinds of unfair competition: practices that are
23 unlawful, unfair, or fraudulent. Graham v. Bank of America, 226 Cal.App.4th 594,
24 610 (2014).
25 The unlawful prong requires allegations that the conduct violated some
26 specific statutory scheme. The Graham court wrote:
27 By proscribing ‘any unlawful’ business act or practice
[citation], the UCL ‘ “borrows” ’ rules set out in other
28 laws and makes violations of those rules
- 19 -
independently actionable.” [Citation.] A “violation of
1 another law is a predicate for stating a cause of action
under the UCL's unlawful prong.”
2
Here, Corday does not plead a violation of any specific statute as a predicate, nor
3
does it appear that it could plead, such a violation. Accordingly, this prong fails to
4
state a claim.
5
As to the unfairness prong, Corday asserts that some aspects of CPT’s
6
conduct violates “the policy or spirit of [antitrust laws] . . . . (Oppos., at 14.) That
7
allegation is based on CPT’s alleged refusal to use its best efforts to license and
8
distribute the Series, (Compl. Para. 197), favoring the Young and the Restless and
9
by “tying” or “bundling” the Series to others that it markets. (Id., at 15; see
10
Compl., at Paras. 12, 13, 198.) CPT argues, in essence, that Corday has done
11
nothing more than dressed its breach of contract claim in antitrust clothing in an
12
effort to bring itself within the scope of the UCL.
13
Both parties cite to Cel‐Tech Communications, Inc. v. Los Angeles Cellular
14
Telephone, Co., 20 Cal.4th 163 (1999) in support of their respective positions.
15
That decision tends to favor CPT’s argument. The court noted:
16
The United States Supreme Court has stressed that
17 the “ ‘antitrust laws ... were enacted for “the
protection of competition, not competitors.” ’ ”
18 [Citation.] They “do not require the courts to protect
small businesses from the loss of profits due to
19 continued competition, but only against the loss of
profits from practices forbidden by the antitrust
20 laws.” [Citation.] Injury to a competitor is not
equivalent to injury to competition; only the latter is
21 the proper focus of antitrust laws.
22
23 20 Cal.4 , at 186. (Emphasis added.) This concept is controlling here.
th
24 This principle demonstrates that a UCL claim for “unfairness” has not been
25 stated. Corday’s complaint is entirely about its dissatisfaction over CPT’s

26 marketing efforts on its behalf. It complains that it has not gotten the return it
27 expected because CPT bundled, or tied, or otherwise was more motivated to sell
28 the Young and the Restless rather than Days of our Lives. Thus, the Complaint
- 20 -
1 focuses on CPT’s alleged injury from CPT’s violation of its contract obligations
2 and not about an injury to competition. Without facts establishing a plausible
3 claim that an antitrust violation has occurred causing injury to competition, the
4 claim fails.
5 Finally, as to the “fraud” theory, Corday contends that it need not plead and
6 prove harm to the public to recover and that actual deceit or confusion need not
7 be shown. (Oppos., at 14, quoting from Buller v. Sutter Health, 160 Cal.App.4th
8 981, 986 (2008). Corday argues that CPT’s argument regarding Buller’s holding
9 is misleading, and that because its complaint includes a viable fraud claim, the
10 UCL claim states a cause of action. First, as noted above, the fraud and
11 concealment claims are seriously defective and fail to state proper claims for
12 relief. Moreover, Corday does not provide the entirety of the relevant language
13 from Buller where the court wrote:
14 It has been stated that “In order to state a cause of
action under the fraud prong of the UCL a plaintiff
15 need not show that he or others were actually
deceived or confused by the conduct or business
16 practice in question. ‘The “fraud” prong of [the UCL] is
unlike common law fraud or deception. A violation
17 can be shown even if no one was actually deceived,
relied upon the fraudulent practice, or sustained any
18 damage. Instead, it is only necessary to show that
members of the public are likely to be deceived.’
19 [Citations.]”
20 Id., at 986. (Emphasis added.) Watson Laboratories, Inc. v. Rhone‐Poulanc Rorer,
21 Inc., 178 F.Supp.2d 1099, 1121 (C.D. Cal. 2001) clearly explains that the “fraud”
22 prong of the UCL is not designed to remedy private disputes between private
23 businesses. Rather, the statutory purpose is to provide a remedy against
24 business practices that threaten to deceive the public whether or not actual
25 deceit has been shown.
26 Careful consideration of each of the foregoing aspects of the UCL suggests
27 that no amendment will cure the defects because the basic nature of the present
28 dispute and the fundamental relief sought is entirely personal to Corday and not
- 21 -
1 to any public interest. Accordingly, the demurrer to the UCL claim is SUSTAINED
2 WITHOUT LEAVE TO AMEND.
3 III. CONCLUSION
4 For the foregoing reasons, the demurrers are sustained WITHOUT LEAVE
5 TO AMEND with respect to the First Cause of Action, aspects of the Fourth Cause
6 of Action, and the Eighth Cause of Action. The demurrers to the Second and
7 Third Causes of Action are sustained WITH LEAVE TO AMEND. The demurrers
8 to the Fourth Cause of Action is OVERRULED IN PART, and to the Fifth, Sixth and
9 Seventh Causes of Action are OVERRULED.
10 Corday will have until August 9, 2019 to file an amended complaint. If
11 Corday determines not to amend, it is ordered to give prompt notice to the
12 Referee so that the Referee and counsel can conduct a scheduling conference in
13 this matter.
14
15 IT IS SO ORDERED.
16 DATED: July 17, 2019 /s/ Gary A. Feess

Gary A. Feess
17 United States District Judge (Ret.)
18 Phillips ADR Enterprises
19
20
21
22
23
24
25
26
27
28
- 22 -
PROOF OF SERVICE
1
I am employed in the County of Orange, State of California. I am over the age
2 of 18 and not a party to the within action. My business address is 2101 East Coast
Highway, Suite 250, Corona del Mar, California 92625.
3
On July 17, 2019, I served the foregoing document described as Order of
4 Judicial Reference re Defendants’ Demurrer on each interested party, as follows:
5 Pierce O’Donnell
podonnell@ggfirm.com
6 Daniel G. Stone
dstone@ggfirm.com
7 Joshua M. Geller
jgeller@ggfirm.com
8 Greenberg Glusker Fields Claman & Machtinger LLP
1900 Avenue of the Stars, 21st Flr
9 Los Angeles, CA 90067
Attorney for Plaintiff RTE 60, LLC
10
Scott A. Edelman
11 sedelman@gibsondunn.com
Blain H. Evanson
12 bevanson@gibsondunn.com
Daniel Nowicki
13 dnowicki@gibsondunn.com
Matthew C. Reagan
14 mreagan@gibsondunn.com
Gibson Dunn & Crutcher
15 2029 Century Park East, Suite 4000
Los Angeles, CA 90067
16 Attorney for Defendants SONY PICTURES TELEVISION
INC., CPT HOLDINGS, INC., COLUMBIA PICTURES
17 INDUSTRIES, INC., SCREEN GEMS, INC.
18
19 X (BY ELECTRONIC SERVICE) I caused such document(s) to be
electronically served on the party identified and no error was received
20 when transmitted. My electronic business address is [EMAIL
ADDRESS].
21
Executed on July 17, 2019, at Corona del Mar, California.
22
I declare under penalty of perjury under the laws of the State of California that
23 the foregoing is true and correct.
24
/s/ Meghan Lettington
25 Meghan Lettington
(Type or print name) (Signature)
26
27
28
- 23 -

Days of Our Lives Demurrer Order

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1 Hon.

Gary A Feess (Retired)

ORDER RE DEFENDANTS’ DEMURRER

25 stated. Corday’s complaint is entirely about its dissatisfaction over CPT’s

16 DATED: July 17, 2019 /s/ Gary A. Feess

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